Earlier quoted context omitted.
MacOS System 7.5.x shipped on ~100MHz PowerPC chips with ~24MB of RAM, a bit higher in the later models. So the Watch most certainly has more processing power. The real problem is emulating PPC -> ARM, which is a very slow process, and why the boot time is so long in the video.
For the record, my Performa 6116CD which shipped with 7.5 had a 60 MHZ PPC 601 and 8 MB RAM. It could run on significantly less than that as well - in fact I believe it ran as far back as on some 80s machines.
System 7.5 had OpenDoc, so it ran in two modes: fast, light, and stable, OR with OpenDoc.